ROYAL GLOBAL TRADE, MUMBAI V. ITO WARD 18(3)(2), MUMBAI

ITA 1194/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8374 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 01-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VISHWAS MCHANDALE
• Keywords: Bogus purchase; Onus to prove
• Section: 143(1); 147

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI C. N. PRASAD, JM & SHRI S . RIFAUR RAHMAN, AM ./ I.T.A. NO . 1194 / MUM/ 2019 ( / ASSESSMENT YEAR: 2010 - 11 ) ROYAL GLOBAL TRADE, 411, KEWAL INDL. ESTATE, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI - 400 013 / VS. ITO WARD - 18(3)(2 ), 607, 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI - 400 002 . ./ ./ PAN NO. AA DFR 6925 J ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI VISHWAS MCHANDALE, AR / RESPONDENTBY : SHRI KIRAN UNAVEKAR, DR / DATE OF HEARING : 27.02.2020 / DATE OF PRONOUNCEMENT : 20.05.2020 / O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMIS S IONER OF INCOME TAX (APPEALS) - 53 IN SHORT REFERRED AS LD. CIT(A) , MUMBAI, DATED 20.12 .18 FOR A SSESSMENT YEAR (IN SHORT A Y ) 2010 - 11 . 2 I.T.A. NO. 1194 /MUM/201 9 ROYAL GLOBAL TRADE 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED ITS RETURN OF INCOME ON 14.10.2010 DECLARING TOTAL INCOME OF RS. 2,65,911/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, I NFORMATION WAS RECEIVED FROM THE SALES TAX D EPARTMENT THAT ASSESSEE HAS IN DULGED IN BOGUS PURCHASES . THE ASSESSMENT WAS ACCORDINGLY REOPENED. THE ASSESSING OFF ICER IN THIS CASE HAS MADE ADDITION @ 12.5% ON ACCOUNT OF B OGUS PURCHASE AMOUNTING TO RS.14,99,597/ - . 3. AGGRIEVED BY THE ABOVE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT (A) CONFIRMED THE ADDITION MADE BY AO AND DISMISSED THE APPEAL OF THE ASSESSEE. 4. NOW BEFORE US, THE ASSESSEE HAS PREFERRED APPEAL BY RAISING THE GROUNDS OF APPEAL AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, HON. CIT - A HAS ERRED IN CONFIRMING ID. AO'S ACTION OF RE - OPENING APPELLANTS' ASSESSMENT U/S 147 OF THE ACT BY IGNORING THE FACT THAT, ID. AO DID NOT PROVIDE THE COPIES OF THE INFORMATION AND THE RECORDED STATEMENTS AND ALSO DID NOT PROVIDE ANY OPPORTUNITY TO APPELLANTS T O CROSS EXAMINE THE ALLEGED BOGUS PARTIES. 3 I.T.A. NO. 1194 /MUM/201 9 ROYAL GLOBAL TRADE 2. WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, HON. CIT - A HAS ERRED IN CONFIRMING AO'S ACTION OF REJECTING APPELLANTS' BOOKS OF ACCOUNTS ON ARBITRARY G ROUNDS THAT THE PURCHASES MADE BY THE APPELLANTS WERE BOGUS. 3. WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPEAL, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, HON. CIT - A HAS ERRED IN ESTIMATING THE PROFIT AT 12.50% OF THE ALLEGED BOGUS PURCHASE S, WITHOUT TAKING INTO CONSIDERATION, THE ACTUAL GROSS PROFIT EARNED BY APPELLANTS FROM THE ALLEGED BOGUS PURCHASES AND THEREBY ERRED IN CONFIRMING THE ADDITION OF RS.1,87,449/ - AS ESTIMATED PROFIT ON THE ALLEGED BOGUS PURCHASES. 4. APPELLANTS CRAVE LEAV E TO ADD, ALTER, AMEND OR WITHDRAW THE AFORESAID GROUND/S OF APPEAL. 5 . LD. AR SUBMITTED THAT LD. CIT(A) HAS SUSTAINED THE ADDITION MADE BY THE AO ON ESTIMATING @ 12.5% OF THE ALLEGED BOGUS PURCHASES OVERLOOKING THAT ASSESSEE HAS ALREADY DECLARED GP RATIO . A CCORDINGLY, HE SUBMITTED THAT 12.5% ESTIMATED BY LD. CIT(A) IS TOO HIGH AND HE RELIED UPON THE VARIOUS JUDGMENTS 4 I.T.A. NO. 1194 /MUM/201 9 ROYAL GLOBAL TRADE PASSED BY THE COORDINATE BENCH OF ITAT, WHEREIN THE BENCH HAS ESTIMATED @ 3% OF THE ALLEGED BOGUS PURCHASES. 6. ON THE OTHER HAND, LD. DR RE LIED UPON THE ORDERS PASSED BY REVENUE AUTHORITIES AND SUBMITTED THAT ESTIMATION MADE BY LD. CIT(A) SHOULD BE SUSTAINED. 7. CONSIDERING THE RIVAL CONTENTIONS AND MATERIAL PLACED ON RECORD, WE NOTICE THAT ITAT MUMBAI BENCH IN THE CASE OF HEERAMANECK & SON VRS. ACIT PASSED IN ITA NO. 1862/MUM/2017, WHEREIN IT WAS HELD AS UNDER: - 5. SO FAR AS THE QUANTUM OF ADDITIONS ARE CONCERNED, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES, WHICH COULD NOT BE CARRIED OUT WITHOUT ACTU AL PURCHASE OF MATERIAL. THE TURNOVER ACHIEVED BY THE ASSESSEE HAS NOT BEEN DISPUTED OR DISTURBED BY THE REVENUE AND THE PAYMENTS WERE THROUGH BANKING CHANNELS. THE ASSESSEE WAS IN POSSESSION OF PRIMARY PURCHASE DOCUMENTS AND WAS ABLE TO RECONCILE THE QUAN TITATIVE DETAILS. HOWEVER, AT THE SAME TIME, THE STATED PURCHASES WERE UNDER GRAVE DOUBT SINCE THE ASSESSEE COULD NOT PRODUCE ANY OF THE PARTY TO CONFIRM THE TRANSACTIONS AND THE INFORMATION RECEIVED FROM INVESTIGATION WING REVEALED THAT ALL THE SUPPLIERS WERE ENGAGED IN CARRYING OUT ONLY PAPER TRANSACTIONS WITHOUT 5 I.T.A. NO. 1194 /MUM/201 9 ROYAL GLOBAL TRADE ACTUAL DELIVERY OF MATERIAL. THE COMPLETE ONUS TO PROVE THE PURCHASES CONCLUSIVELY WAS ON ASSESSEE, WHICH HAS REMAINED UN - DISCHARGED. IN SUCH A SCENARIO, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORIZE FOR PROFIT ELEMENT EARNED BY ASSESSEE AGAINST POSSIBLE PURCHASE OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST ALLEGED BOGUS PURCHASES, WHICH LOWER AUTHORITIE S HAVE RIGHTLY DONE. HOWEVER, CONSIDERING GP RATE OF 10.59% ALREADY REFLECTED BY THE ASSESSEE AS WELL AS VAT RATE APPLICABLE TO THE GOODS BEING DEALT WITH BY THE ASSESSEE, WE FIND THE ESTIMATION TO BE ON THE HIGHER SIDE AND THEREFORE, WE RESTRICT THE SAME TO 3% OF ALLEGED BOGUS PURCHASES OF RS.1,87,08,961/ - . THE SAME COMES TO RS.5,61,269/ - . THE ORDER OF LD. AO STANDS MODIFIED TO THAT EXTENT. THE LD. AO IS DIRECTED TO RE - COMPUTE THE INCOME OF THE ASSESSEE IN TERMS OF OUR ABOVE ORDER. 8 . THEREFORE, RESPECTFU LLY FOLLOWING THE AFORESAID DECISION, WE NOTICE THAT ASSESSEE HAS ALREADY DECLARED GP RATIO OF 9.68% AND 14.63% FROM THE PURCHASES MADE FROM PRAVESH ENTERPRISES AND RAJAT TRADING COMPANY RESPECTIVELY AND ON AN AVERAGE, ASSESSEE HAS ALREADY DECLARED 9.5% OF GP . THEREFORE, WE ARE INCLINED TO DIRECT THE AO TO ESTIMATE THE INCOME @ 3% OF THE 6 I.T.A. NO. 1194 /MUM/201 9 ROYAL GLOBAL TRADE ALLEGED PURCHASES. ACCORDINGLY, WE DIRECT THE AO TO ESTIMA TE THE INCOME OF THE ASSE S SEE @ 3 % OF THE ALLEGED PURCHASES. 9 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MAY 2020 . SD/ - SD/ - ( C. N. PRASAD ) (S. RIFAUR RAHMAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 20 . 05 .2020 SR.PS . DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI